What is the Elk Valley Property Tax Sharing Agreement (EVPTSA)?

The District of Sparwood, the City of Fernie, the District of Elkford and Area A of the Regional District of East Kootenay have an agreement that shares the property taxes levied on the industrial coal mining properties in the Elk Valley. This agreement was effective March 31, 2008 for a twenty-five year term.

What properties are subject to the EVPTSA?

All properties with a Class 4 industrial assessment that are coal mines, coal processing works or coal related infrastructure that are located within the confines of the RDEK Area A will be subject to the agreement. If an identified property is outside the existing boundary of a municipality in this area, a municipality will apply for a boundary expansion to be able to tax these properties as part of the agreement.

What is the history of this agreement?

Since 1983, Elkford, Fernie and Sparwood have participated in an Elk Valley Industrial Tax Base Sharing Agreement. In 1991 the tax levy from this agreement was “frozen” and each community had received essentially the same property tax revenue from the mines since 1991, with the exception of Elkford which received a small increase beginning in 1995 to service IDSA debt. The tax requisition to Sparwood had not increased since 1984 – the increases between 1984 and 1991 were distributed to Elkford and Fernie.

The reliance on the industrial taxes from the coal mining industry is in part due to the fact that the Elk Valley communities are the product of the coal mining industry. Diversification of the economy of the Elk Valley has been slow. The City of Fernie, incorporated in 1904, has experienced many boom and bust years associated with the coal mining industry. Sparwood grew from the relocation of the coal mining towns of Natal and Michel in the 1960’s. Fording Coal constructed the town of Elkford in the 1970’s to house their employees. The major recreation services provided in Sparwood and Elkford were developed through significant contributions of both volunteer time and financial resources by employees, local mining unions and the companies that owned the mines. The reliance on the industrial taxes to support these services is significant considering each community’s limited ability to diversify their taxation base. As such, the “quality of life” amenities that the local governments provide for the employees of the mines are directly related to the taxes paid by the mining industry.

Prior to the original tax sharing agreement, the letters patent of the three municipalities provided to each municipality the assessment for one or more of the separately owned mines. The industrial mine taxes under this scheme varied significantly in each municipality, and left some of the mines in a less competitive position than neighbouring mines. The tax sharing agreements levy the same rate on each mine and the taxes collected are then divided amongst the local governments.

The original agreement based the division of the taxes on a formula that considered the number of mine employees residing in each municipality, the assessment base and the per capita expenditures of each municipality. The 2008 agreement allocates the taxes by a fixed percentage to each local government; the percentage allocation was determined by the level of each local government’s dependence on the mines and their ability to diversify their assessment base.

What was the effect of the 2008 agreement?

The 2008 agreement had three primary changes that impacted the local governments. The first was that the base property tax levied on industrial coal mining properties increased from $6.9 million to $8.9 million. The second was that the base amount of $8.9 million will be adjusted annually for inflationary effects. The inflationary adjustments will be the lesser of a) the average annual tax change to residential properties or b) the BC CPI index, excluding food. The third major impact was that all properties with a Class 4 industrial assessment that are coal mines, coal processing works or coal related infrastructure that are located within the confines of the RDEK Area A, are subject to the agreement. If an identified property is outside the existing boundary of a municipality in this area, a municipality will apply for a boundary expansion to be able to tax these properties as part of the agreement.

These changes also impacted Teck Coal. Firstly, the tax burden was increased by $2 million. Secondly, the tax levy is adjusted annually for inflationary effects. Thirdly, additions and deletions of industrial properties will not automatically adjust the amount of base taxes for the pool. Adjustments to the base taxes due to property additions and deletions must be renegotiated amongst the local governments. Lastly, the inflationary adjustments will be limited to a reasonable inflation factor. This provides the industry with protection from large property tax increases; which is a protection not provided to other taxpayers.

The agreement was amended in 2009 to include additional properties as a result of  the boundary extension applications submitted by the Districts of Sparwood and Elkford.

The following table shows who collects the property taxes and where they are distributed:

Distributions Sparwood Elkford Fernie RDEK
Taxes Collected (Total of $9,699,526) $4,956,729 $4,742,797 - -
Sparwood & Elkford Distribute to Fernie ($1,356,847) ($1,475,130) $2,831,977
Sparwood to RDEK Area "A" ($544,611) - - $544,611
TOTAL REQUISTION
$3,055,271
$3,267,667
$2,831,977
$544,611